Kraft Foods chief executive Irene Rosenfeld is playing hardball with her $16.4 billion hostile offer for Cadbury, triggering a bid battle that could stretch for up to three months.
Cadbury lost no time rejecting what chairman Roger Carr described as Kraft's derisory offer, which values the British chocolatier's shares at 717 pence each, or 9.8 billion pounds ($16.4 billion).
That is down from 745 pence, or 10.2 billion pounds, at the time of the informal approach in September.
But with hopes of a rival bidder fading, bankers and analysts say that Kraft is unlikely to soften its strategy in the run-up to its final bid in early February and could end with a final bid of 800 pence -- or even less.
Here are the various ways a takeover battle could unfold: KRAFT RAISES ITS OFFER - LIKELY
The North American food group needs to put more than 717 pence before investors, especially with the holiday season approaching, when strong confectionery sales will boost Cadbury's earnings.
But a top shareholder in Cadbury said investors in the British confectionery firm would find it hard to turn down an offer of over 8 pounds a share from U.S. suitor Kraft.
If there is 8 pounds ($13.42) plus on the table (per share), it is going to be difficult for Cadbury shareholders to walk away from that - but that's not what's on the table at the moment, the shareholder said.
A banker not involved in the deal said that Kraft's tactics were designed to lower expectations ahead of its final offer.
Kraft is playing bid tactics. Its approach was opportunistic and they want to get Cadbury on the cheap because they don't think anyone else is out there, the banker said.
I'd imagine they are planning a final bid of around 800 pence a share, but there is a material chance it will fail at that level.
A RIVAL BIDDER EMERGES - UNLIKELY, BUT HIGHER CHANCE NOW
The chances of a rival bidder or a white knight that is friendly with Cadbury are slightly higher now that Kraft has played its hand, but they are still slim.
No white knight was found and there were no counter bidders so there was no reason for Kraft to increase its offer, said Clive Black, head of research at Shore Capital.
Analysts have tipped U.S. chocolate maker Hershey, food group Nestle, PepsiCo and Unilever as the potential rivals to Kraft.
Unilever finance director James Lawrence said last week the company was not interested in buying Cadbury.
PepsiCo is occupied integrating its North American bottlers, and analysts say it does not have the bandwidth to pursue a second large purchase before this process is completed.
Analysts have questioned whether Hershey could afford to bid for Cadbury on its own, while Nestle would face competition issues in the chocolate market in the UK.
KRAFT WALKS AWAY - UNLIKELY
Kraft is unlikely to walk away because there are sound strategic reasons for the deal. For Kraft, the transaction is a natural extension of a product strategy to push into high growth and high margin areas.
The company has already spent around $50 million to $70 million on financing costs and would only pull out without raising its bid if its best offer fell far short of Cadbury investors' expectations.
Still, Kraft said it would not overpay for Cadbury on Nov. 3 after disappointing investors by posting weaker-than-expected quarterly revenue and cutting its full-year sales forecast.
What we can afford is not relevant. What is relevant is what Cadbury is worth and that will guide our actions going forward, Rosenfeld said.
(Reporting by Victoria Howley; Editing by David Cowell)